There are over 180,000 UK charities – could (or should!) there be more mergers?
Just as in the corporate world, ‘merger’ may well be a euphemism for ‘takeover’. There can be many good reasons why several overlapping charities exist and sometimes the ability to be flexible and responsive to needs makes smallness a real asset. However, a range of factors mean that trustees should always have the possibility of a merger somewhere within their strategic thinking.
Drivers for merging
The most visible reasons for merging include:
· Improving quantity and/or quality of services for users
· Exploiting economies of scale (especially in capital-intensive sectors such as housing)
· Raising profile and attracting more funding
· Sharing knowledge and expertise
· Reducing overhead costs
· Avoiding duplication of effort (which can simplify things for potential service users)
· Making it easier and more affordable to recruit staff with particularly sought-after skills or expertise
There are also less explicit reasons, some of which may in fact only ever be known by the trustee board and a small group of senior executives:
· Rescue an ailing charity (Either through financial, regulatory, legal or reputational pressures)
· Loss of direction and leadership, leading to inertia
· Loss of will to continue as an independent entity (Maybe where a founder or Chair have been the driving force, but are no longer able to continue)
· A way to overcome seemingly insuperable difficulties
· Averting major crisis (Particularly where contracts to provide services are involved and have become too onerous for a smaller organisation to continue, but there is a need to continue to serve beneficiaries)
Stages in a merger process [adapted from Managing Without Profit by Mike Hudson]
1. Exploration
2. Preliminary assessment
3. Legitimising, planning and agreeing the process
4. Planning and negotiation
5. Implementation planning
6. Formal Decision-taking
7. Implementation
8. Post-merger integration
Conclusion
The number of registered charities reflects the wide range of reasons, objectives, geographies and tradition of the UK’s incredible social sector. In many ways it is the uniqueness of this and its sheer scale and impact that enables so many to continue, from the largest to the smallest.
Generalisations about efficiency and duplication are often inaccurate, but there can also be significant synergies and benefits from combining with another organisation. It is certainly worth trustee boards considering the question periodically to ensure that their charity is not simply continuing through inertia but is genuinely serving its beneficiaries as effectively and impactfully as possible. If a merger is being seriously considered, it is imperative that time is taken to plan the necessary stages to be followed and to ensure that adequate time resources are dedicated to the entire process.
[The is the summary of an article published in Charity Finance, June 2022]